Shares in Playtech, the company behind the software powering thousands of fixed-odds betting terminals and Sun Bingo, have fallen 20% after it issued a profit warning.
The company said it expects to miss profit forecasts, blaming problems including a setback with its contract to provide software for Sun Bingo, a gambling website owned by Rupert Murdoch’s News UK.
The firm blamed technical problems moving the website on to its own software platform, after winning the contract to run the newspaper’s bingo business in 2015.
It also blamed “lengthier seasonality”, which it defined as suffering quieter periods due to the weather.
What are FOBTs?
Fixed-odds betting terminals (FOBTs) are machines, found largely in bookmakers and betting shops, that allow customers to stake up to £100 every 20 seconds on digital versions of games such as roulette.
Why are they considered a problem?
Critics of FOBTs say they are particularly addictive, allow gamblers to rack up huge losses within a few hours, and are concentrated in deprived areas. They have also been linked to money laundering.
Will the review improve matters?
It depends on the outcome of a 12-week consultation. If maximum stakes are cut to £2, bookmakers say shops will close en masse and problem gamblers will get their fix elsewhere. If stakes are cut to £50, it will be business as usual for bookmakers, with campaigners warning that gamblers will continue to make huge losses. Something in between seems the most politically palatable option for the government.
Although Playtech makes FOBT softwares, it did not comment on the recent government review, which concluded that the maximum stake should be reduced from £100, potentially to as low as £2. Clients include William Hill, which is also likely to suffer a drop in revenues if FOBT stakes are slashed.
Playtech also noted a slowdown in Asia due to “recent changing market conditions”, a reference to recent restrictions on online gaming in Malaysia, one of its major markets.
The firm said it has given up hope of any improvement this year and warned that Asia’s contribution to revenue would “consistently reduce over time”.
The company expects annual profitto fall 5% below the bottom end of market expectations.
The company, which also makes gambling games themed around The Flintstones and comic book characters such as Batman, said in August it expected a “strong performance in 2017”.
But shares in the firm, founded by the Israeli billionaire Teddy Sagi, dropped more than 20% after the profit warning, cutting its stock market value by nearly £650m. It was the biggest faller on the FTSE 250.
Sagi, one of Israel’s richest men, has banked more than £780m by selling his shares in the firm over the past year, as he looks to fund a move into real estate investment.
His property portfolio includes London’s Holborn Links Estate and Camden Market, which he views as “a new Silicon Valley”, according to a spokesperson.
